Typically, the summer season is favourable for the cement industry, with increased demand from housing construction and infrastructure projects. However, this time, expectations were low. In some parts of the country, extreme heat affected cement sales, and general elections slowed down government construction activities.
The Indian cement industry witnessed several key events in the first quarter of FY25. Despite challenges like slow demand and pricing pressure, some companies recorded strong volume growth.
In this article, we will explore various aspects of the cement industry and understand how these factors might impact the sector.
What’s Happening?
According to Mint, cement manufacturing companies are currently going through a difficult period. The volumes of 11 major cement companies have grown by just 4% compared to last year, indicating a slowdown in sales momentum. Additionally, realisations have dropped by 2.5% sequentially and 5.5% on a YoY basis.
Moreover, cement prices have decreased by 3% MoM, reaching a five-year low of Rs 313 per bag. Prices in southern markets fell by Rs 10-15 per bag in August, while prices remained stable in other regions. Due to lower construction activity and higher production, both demand and prices for cement have been affected. After this weak start, the road ahead for the cement sector in FY25 looks challenging.
Indian Cement Industry
India is the second-largest cement producer in the world, accounting for over 8% of global installed capacity. Cement consumption in India is estimated to reach 450.78 million tons by the end of FY27.
In terms of market size, the Indian cement industry was valued at 3.96 billion tons in 2023, and it is expected to reach 5.99 billion tons by 2032, growing at a CAGR of 4.7% during 2024-32.
India has a total of 210 large cement plants, of which 77 are located in Andhra Pradesh, Rajasthan, and Tamil Nadu. Approximately 32% of India’s cement production capacity is based in South India, 20% in North India, 13% in Central India, 15% in West India, and the remaining 20% in East India.
The following graph illustrates the total cement consumption in India from FY16 to FY23.
The following graph illustrates the total cement production in India from FY16 to FY23.
What Does This Mean for Investors?
According to Antique Stock Broking, cement companies may increase prices by Rs 30 after the monsoon by November 2024. This could help companies improve their margins, which is a positive sign for investors. Additionally, Indian cement companies are among the largest green cement manufacturers in the world. India’s top four cement companies — UltraTech, ACC-Ambuja, Shree Cement, and Dalmia Cement — are set to add more than 42 million tons of capacity in FY25, increasing their market share from 48% in FY23 to 54% by FY26.
The cement and gypsum products manufacturing industry in India has also seen significant foreign investment (FDI). According to IBEF, the industry attracted Rs 5.08 lakh crore (US$ 6.10 billion) in FDI between April 2000 and December 2023.
What’s Next?
Infrastructure is a sector that accounts for more than 24% of total cement demand, and it is expected to grow rapidly due to strong government development initiatives. After Andhra Pradesh’s Chief Minister N. Chandrababu Naidu declared Amaravati as the state capital, there will be a significant need for extensive infrastructure development, which will drive cement demand.
Moreover, as India moves towards becoming a middle-income country and with a stable interest rate environment, the housing sector is also gaining momentum. The Modi 3.0 government has approved the proposal under the Pradhan Mantri Awas Yojana (PMAY) to provide three crore additional rural and urban homes, which industry experts believe will play a key role in demand recovery.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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